I'm thinking of repurposing a Dell XPS 1710 laptop (dual core 32 bit CPU, 3 gigs of RAM) for a virutal networking machine. Should I use Server 2003 or Server 2008 as my base operating system for this? What would be the advantages and/or disadvantages of each OS?
By "virtual network" do you really mean "a bunch of virtual servers all talking to each other"?
If so then that can be done with the kit you have so long as you don't have too many VMs, they don't need too much memory and performance isn't an issue - if you're happy with those caveats then fire away.
The base OS isn't an issue as such but it depends on which hypervisor you want to use, if you want Hyper-V then you'll NEED W2K8, if you're going to use Virtual Server or VMWare Workstation/Server then W2K3 is fine.
what are you planning to do with the machine exactly? for proper virtualization, you better get a 64bit CPU with VT technology, and as many disk spindles as you can.
for a simple vmware-server or ms virtual-server, a non-VT host is OK, but the performance will not be very good.
so do keep in mind - an XPS might be a nice gaming machine, but it's definitely far from being a server.